War with Iran?

Last night, I tuned into Fox News, as I do from time to time, because I always suspect that they provide insight into the latest in administration thinking. I watched Paul Gigot, the Wall Street Journal editoralist, and The Beltway Boys. The prime topic was "what to do about Iran," and the general feeling was "why haven't Cheney and Bush sent in the bombers yet?" The Boys at Fox and WSJ seem to be ready for another war, seeing as we've had so much success in the current one.

Gigot quoted an interesting report that said that 70% of all American casualties come from roadside bombs planted by Shiite militias with parts supplied by Iran. Now, I have no way of knowing whether this is true or false. What makes this "statistic" interesting is that it directly contradicts everything else the administration is saying. In every single speech and statement about Iraq, we are told, "Al-Qaeda, Al-Qaeda, Al-Qaeda!" In fact, Cheney and Bush pause in saying "Al-Qaeda" only long enough to interject "9/11!." Now the party line seems to be shifting; the enemy is not the Sunni insurgents (since Petreaus has made a temporary alliance with them), but the Shiites, especially those who share religious and cultural ties with Iran. They are the ones (so the current story goes) who plant most of the bombs that are responsible for most of the body bags, lost limbs, and lost minds.

I can't get over the feeling that we are seeing another sales job, similar to the one that got us into the war in the first place. It looks like the same accident about to happen all over again. Only worse. Much worse. While we were promised a six-month war in Iraq with a relatively small occupation force, this war is supposed to last three days with no army at all. Instead, the Air Force will take out 1 to 2,000 targets, the regime will collapse, and everyone will live happily ever after in a New Democratic Paradise, just as they do in Bosnia, Afghanistan, and Iraq.

Unfortunately, this fairy tale is even less relevant for Iran that it was for Iraq. Saddam Hussein was friendless and the head of a weak and unstable country. Iran, on the other hand, is acquiring powerful allies, namely, the Russians and the Chinese. In fact, the administration seems bent on forcing these old competitors into an anti-American alliance, an alliance which has already borne fruit in largely forcing the Americans out of the central Asian countries that were formed in the break-up of the Soviet Union, places that Americans know nothing about and can't even pronouce. Russian is re-establishing its hegemony over its old empire, thanks in large part to this administration's diplomatic and military blunders. And China's insatiable need for oil and raw materials makes an alliance with Iran a tempting prospect. I don't think they would overtly join a war to defend Iran, but they can give the Iranians advanced technical and military support, and put all kinds of pressures on Europe and the United States.

Of course, the war propaganda is not confined to the right-wing. We had the spectacle of Lee Bollinger, the President of Columbia University, lecturing Ahmadinejad with incredible rudeness. It is not that Bollinger was wrong to pose the tough questions to the Iranian president; he was right to do so. But you do not invite a man to your house for the express purpose of insulting him. Across the Middle East, the whole thing was taken (correctly, I think) as the very sign and symbol of American arrogance and condescension towards the "Third world" in general and the Muslim world in particular. Ahmadinejad is quite capable of making a fool of himself (as he did) without the host's help. Instead of exposing a pretentious fool, Bollinger managed to make him a figure of sympathy in the Middle East and in Iran, where he is normally very unpopular.

Are Cheny and Bush planning another war? Who knows. Insane as it might sound, it is certainly a possibility with this pair of arm-chair warriors. Will the country stand for it? I doubt, but the real question is, "does that matter?" The nation has already turned decisively against the current war, and that hasn't mattered one little bit. The Democrats are too weak and divided to to do much about it, and the Republicans too wedded to the party line to dispute the question very much. Indeed, the fact that neither Cheney nor Bush will ever again have to face the voters may mean that they can ignore the voters. And their past actions have shown that they are quite willing to ignore reality. Cheney and Bush may wish to go out in a blaze of glory and no-bid war contracts. And what's a few thousand body bags compared to that?

The signs of war preparations will not be so much the gathering of military force, but the volume of propaganda. If the party line continues to shift from Al Qaeda to Iran, then you will know that war preparations are underway. Fox News is always the first source for this shifts in party line. From what I have been seeing, we should be afraid, very afraid.


News that's Fit to Print

It isn't often that a major newspaper runs even a single editorial on a distribtist theme like the family-centered economy. But yesterday, the Dallas Morning News ran not one, but three editorials on this issue. The first was from Patrick Deneen, Europe's Secret. He recounts a three week trip through Europe, but not the Europe of either the American liberal or “conservative”narratives, which mainly concern places like Amsterdam, Brussels, and the Hague, but through the small towns of Bavaria, Austria, and Switzerland. In this Europe,

Nearly every household seems involved with the land in some way or another, whether through a small garden and wood stand or a larger farm. In the back yard of many homes, one still finds chickens that roam free; fruit trees that are now bearing apples, pears and cherries that will be made into jam; water barrels that catch rainfall with which families water their plants. Nearly every yard has an enormous pile of wood, stacked carefully and in perfect symmetry.
Because of laws governing closing times and zoning restrictions, family businesses and small companies still dominate the landscape. Owning the stores in which they work, proprietors are far more knowledgeable about the products they sell than one typically finds among minimum-wage workers in American retail megastores. And in many cases, families live above the businesses they run.

Prof. Deneen points out that this Europe contradicts the grim narratives of both the right and the left:

In America, it is our liberals who praise the liberties of Europe while overlooking the conservative impulse of its self-restraint. Meanwhile, our conservatives condemn the statism of Europe without understanding that efforts to conserve – to be conservative – require the active support and laws of government in order to combat the tendencies of markets to produce waste and undermine thrift.

In the second editorial, the redoubtable Allan Carlson answers questions about his forthcoming book, Third Ways: How Bulgarian Greens, Swedish Housewives, and Beer-Swilling Englishmen Created Family-Centered Economies – And Why They Disappeared. Talking about how a family-centered economy might come about in this country, Prof. Carlson says,

A contemporary American Third Way would build on those sweet cultural revolutions already spreading in the land. Homeschooling, a rarity three decades ago, now embraces 2.5 million children and is reinventing American education on a family-centered model.
After a century of decline, family-scale agriculture is growing again. "There has never been a better time to be a farmer" crows Small Farmer's Journal this month. Market demand for organic foods has tripled the income of many family farms; there are 4,500 farmers markets in 2007, up from 1,750 in 1994; Community Supported Agriculture farms, where farmers and their customers form a partnership, may number 3,000 (none in 1985). A surging worldwide demand for milk has also reinvigorated family dairies.
Meanwhile, the number of home-based businesses in the United States may be as high as 36 million, quadruple the number found in 1990. Since most American laws and regulations still favor mass schooling, agribusiness, centralized factories and big-box chains, these gains remain fragile. All the same, the political party that genuinely embraces this emerging family-centered Third Way will know success.

Carlson's last line is particularly important. Rather then being politically impotent, Distributists and like-minded people hold the key to political power in this country, if only they realized it. In this age where officialdom worships global giganticism for its own sake, the party that embraces the local business, the family farm, the sufficient family, will be the party that achieves power, and achieves it most securely.

Finally we have Crunchy-con Rod Dreher's editorial, Not even our parks are safe. Rod is the editorial director of the Morning News and doubtless responsible for this Rare Display of Sanity in a Major Metropolitan Newspaper. His comments are directed at the individualism which has become the basis for both the “Liberal” and “Conservative” politics and ideology. In reality, the liberals have abandoned true liberality and the conservatives have nothing to conserve. Rather, both have surrendered to a cultural conformity, where the intensity of the arguments in in direct proportion to their triviality. Rod notes,

My friend Tom Kelly has lived in Washington all of his long life. During his Depression-era boyhood, families would escape the heat by sleeping under the stars in the public parks, everyone together, happy as clams. Can you imagine?
And here we are, wealthy and free beyond anything our grandparents could have conceived, but afraid to let our children go to the park on their own. How rich we have become, and how very poor.

This theme of cultural poverty amidst material wealth is one that resonates with me personally. I grew up in New York City in the 50's (giving away my age) in a poor neighborhood. But the odd thing was that I didn't know it was poor until I left it. Indeed, it seemed very rich to me. For example, there is the matter of transportation. No one on the street had a car. Yet, for 15 cents, the subway, and the City, were ours. My brother and I would love to go to the Museum of Natural History to see the Tyrannosaurus Rex that dominated the lobby, or the Blue Whale that hung in the basement. Or we could go, at our leisure, to Coney Island or even Far Rockaway. At 8, we were truly men of the world. My own children, by contrast, grew up in a prosperous Texas suburb; there were always two cars in the driveway, but there was no transportation, at least not any available to them alone. And it's just as well, for there was no real place to go; the cultural highlight of the city was the shopping mall.

Congratulations to Rod Dreher and the Dallas Morning News; finally, some news that's fit to print.


Binary Economics, Pro and Con

Many thanks to Rodney Shakespeare for his brief explication of Binary Economics. I think it is a useful theory and shares the goals and objectives of Distributism, namely, the necessity of distributive justice for economic order. However, I am not a full convert, and can briefly list here the pros and cons of the system. Rodney is already familiar with these critiques, as we have had this conversation before.


  • Binary economics is binary, that is, it attempts to view economics as a system of complimentary factors, primarily labor and capital. A system that emphasizes one against the other (and it doesn't matter which one) will always be wrong.
  • It emphasizes distributive justice, without which no economy can ever reach equilibrium and will require meddling by the state of vast infusions of consumer credit (usury) to balance supply and demand.
  • Its major tool, the Employee Stock Ownership Plan (ESOP) is a kind of industrial distributism in itself.
  • It recognizes the ruinous role of usury in the economic system, and the power of "fiat"and debt-based money to create a special and undeserving class of "winners" at the expense of everybody else.
These are not inconsiderable advantages, and Binary Economics deserves praise for coming closer to the truth that does the Neoclassical or the Austrian models. However, against these advantages, we can balance some serious questions about the theory.

  • Although it advertises itself as "the" new paradigm, it is in reality much too dependent on the errors of Neoclassicism, especially in regard to productivity. In fact, BE's "productiveness" theory is just a radical restatement of J. B. Clark's "marginal productivity" theory, and if "productiveness" (which allocates 2/3rds of productivity to capital) where to be widely adopted, it would work against worker rights, not for them.
  • BE holds that savings are not necessary for economic expansion, because the government can just print money to lend to new enterprises, money that will be paid back and then withdrawn from circulation. However, while it is true that financial savings are not necessary, actual savings are. A new plant can only be built from existing stocks of cement, and while the government can easily print money, it cannot print cement. There must be unused capacity in cement (and everything else) for expansion to take place.
  • Printing money can only re-allocate existing stocks. A person who saved a million to build a factory (or borrowed from those who saved) must compete with the person who was given a million by the government to build the new plant. Therefore, such printing is inflationary. Now, BE claims it is not inflationary, because the money is withdrawn from circulation as it is repaid. But in between the loan and the repayment, it certainly will be inflationary.
  • BE adopts the marginal utility theory of value (which is incoherent) and rejects the only coherent theory of value, the Cost of Production theory or the Labor Theory of Value. Again, it is repeating a mistake of neoclassicism.
  • Finally, it depends on the "shares" model of ownersihip, which is technically not as good as the cooperative model of ownership. Shares create a problem when workers exit the company, because shares represent a claim on future earnings. Thus, in one of the most successful ESOPs, the Springfield Remanufacturing Company, the company had to spin off a non-employee owned subsidiary for the express purpose of growing it and selling it off when the original founders retire, so as to have funds to pay off the share claims of these original owners, which will be considerable when they retire; it is somewhat paradoxical for an ESOP to depend on a non-employee owned company in order to succeed.
  • Contrast this with cooperative ownership, in which the workers take out their share of the profits when they leave, but have no claims on the future earnings of the firm. Hence, there is nothing to buy out, and no problems threatening the stability of the company. The retiring employee has his share of the cash that his work has created, and may invest it as he pleases, but has no further claims on the workers who remain with the firm.
Having said all that, I genuinely admire the advances that Binary Economics brings to the discussion, and find that the practice has brought true economic freedom to many people.


Binary Economics

The following article is contributed by Rodney Shakespeare, Co-author (with Robert Ashford) of Binary Economics: The New Paradigm. Binary economics is most famous for its advocacy of ESOPs (Employee Stock Ownership Plans), but it has other aspects as well. This is the second in our occasionally series on alternative approaches which embody distributive principles.

Binary economics is a school of economics expressing a new universal paradigm which challenges the fundamental assumptions of conventional economics. It states that it is a private property, market economics which ensures that, over time, all individuals come to ownership of an independent capital estate providing an income.

A summary of binary economics might be – a justice which creates efficiency and an efficiency which creates justice. A more detailed summary could be – the use of central bank-issued interest-free loans, administered by the banking system, for the development and spreading of various forms of productive capacity (and the associated consuming capacity) thereby creating a balance of supply and demand and forwarding social and economic justice.
Some quick illustrations of the binary proposal to use central bank-issued interest-free loans are:−

  1. a halving or more of the usual cost of a bridge, sewage works or hospital
  2. a halving or more of the usual cost of micro-credit for poor people to start a business
  3. the enabling of any individual in the population (from a baby to a retiree) to become a shareholder in one of the great corporations. There are also binary plans for pensions and universal health care.
The key point is that binary economics is determined to spread the ownership of all forms productive capacity to everybody in the population.

But − wait a minute − isn’t that Distributism as well? And isn’t that the sort of thing which is in, or should be in, a modern Christian economics? And what, for that matter, is in, or should be in, a modern Islamic economics?

The answer is that any truly modern form of economics includes the following characteristics:–
  • markets which, in a fair and efficient way, really do work for everybody
  • private property which extends to all individuals in the population
  • a proper balance of supply and demand
  • capital ownership which extends to everybody
  • some form of independent income for everybody
  • no inflation
  • an ethic concerned with social and economic justice
  • an interest-free money supply which is totally directed at the real economy and so at the development and spreading of productive (and the associated consuming) capacity
So it could be Distributism, you might say. After all, Distributism has markets and private property; it wants social and economic justice; it wants capital ownership for all….. – yes, it could be Distributism.

Or rather, it could be Distributism IF Distributism really did have the mechanisms to achieve its aims. And IF – and this is of fundamental importance – Distributism had paradigm-altering concepts capable of challenging conventional economics so that the new ideas and policies are seen as being more realistic, more true, more just and more practical than conventional economics. It has to have these concepts because the big underlying issue is whether there is anything which can successfully challenge conventional economics, its nostrums, contradictions, injustices and inefficiencies. And not just that but it must also be something which can produce a stable economics (at a time when a global financial collapse is looking increasingly likely) and which can address the big environmental problems (and an environmental collapse is looking increasingly likely as well).

Now these are big matters and none of them can be properly addressed in an article such as this. But you might like to reflect on some of the issues in particular asking yourself what you have in common with other modern people of faith and of good faith. If you think you do have something in common then go to Wikipedia and have a look at the article on binary economics and, if you go to www.binaryeconomics.net you can buy The Modern Universal Paradigm which deals with all these matters and more.

Rodney Shakespeare.



In times past, the Review linked to the excellent columns of Devvy Kidd, author and Constitutional activist. She does again in her current column, posted on the opinion website NewsWithViews.com, called “Got Bling?”

She notes that the recent Federal Reserve Board’s cut of interest rates will not really help the average American that much. With said average American drowning under personal and corporate debt, scrambling for extra money to keep poverty and starvation away from their door, they don’t understand the ins and outs of our monetary system. Prices for staples are rising, like in so many other countries, from bread to milk to oil and gasoline.

And with the recent rush on the English bank Northern Rock fresh in their minds, folks wonder if the same thing will also happen to them in the US.

As Ms. Kidd notes, hard times are coming. With the dollar still losing value against the Euro and the British Pound, costs for basic foodstuffs will continue to rise.

What to do? In the long run, it is up to us who know about Distributism to promote it in our neighborhoods. Explain it to all who will listen. Then get them to act on what they learn in their own neighborhoods. Change local policies that crush the small business and co-operative sectors, especially in taxes and regulations. Begin local farmer-consumer co-ops in your neighborhoods. Begin plans to introduce local currencies to keep local economies going, like what’s being done in the Berkshires of Massachusetts and in Ithaca, NY. Flood Congress with letters and calls to demand reduction of tax burdens on the majority.

In short, Distributism is the way out of our national dilemma that Ms. Kidd so aptly warns us of. Let’s get to work - and prayer - and clean up the mess. Bravo to you, Ms. Kidd.


Hayek's Super-Highway

The headline in Sunday's New York Times read In Turnaround, Industries Seek U.S. Regulations. The lead proclaimed, After years of favoring the hands-off doctrine of the Bush administration, some of the nation’s biggest industries are pushing for something they have long resisted: new federal regulations.

The problem with this headline is that what it describes is not a turnaround and it is not news. Corporations may oppose this or that regulation, but the general idea of regulation is something that they love and always have, especially when, through political influence, they get to appoint the regulators. Why should corporations love regulation? The answer involves the need to protect capital from competitive anarchy; it was a situation predicted nearly 100 years ago by Hilarie Belloc in The Servile State. Capitalism certainly creates uncertainty for the worker, but it also creates another kind of uncertainty for the capitalist; a great fortune may be wiped out by a new product and a better service; every investment would be at risk every moment, a situation that is intolerable to every investor.

Hence, no one fears the competitive anarchy of pure capitalism as much as does the pure capitalist. Great fortunes require great protection, and the greater the fortune the higher the wall that surrounds it. And nobody builds walls to protect the corporations better than does the Federal govmint. Regulations are the best form of protection. Regulatory burdens are a small part of a big business, but a large part of a small business, perhaps even the difference between success and failure. The form a market barrier, discouraging most who would enter the competitive lists.

Which brings us to F. A. Hayek's most famous work, The Road to Serfdom. This book, written at the close of World War II, attempted to tie the growth of Fascism and Nazism to the rise of govmint planning. The book played fast and loose with the facts; Germany and Italy pretty much let the industrialists have their way, and their war-time economies were about as "planned" as was the American and British economies. And certainly the Japanese were as capitalist as Hayek or anyone else could wish them to be. Nevertheless, his central thesis, that the greater involvement of government in the economy would lead to a loss of freedom, would be a road to serfdom, cannot be doubted. And in this thesis, both Hayek and Belloc would agree.

Hayek was pretty much derided by his colleagues and ignored by govmint policy makers. But all that changed with the ascension of Margaret Thatcher and Ronald Reagan. His ideas moved to the center of govmint policy. His triumph was near complete in the centers of both academia and power. And since his ideas have reigned supreme, we would expect to see a more modest govmint run on a more frugal basis, minding its own business (mainly order and the defense of property) and paying its own way, right?

Wrong! Since the triumph of Hayek, we have seen just the opposite: an ever-more powerful govmint financed by ever-greater deficits. The govmint has not shrunk, but grown; the deficits were not eliminated but grown great; the power of the state was not curtailed but expanded. All of these are contrary to the intent of Hayek's great work. What went wrong?

The problem is that Hayek's theories are highly abstract and lack the realism of Belloc's work. Hayek's work is a case-study of the law of unintended consequences. His unfettered capitalism lead to the unfettered growth of corporations, with the result of the concentration of wealth and power at the top and their subsequent domination of politics. And they use their influence to protect their positions. This is precisely the effect of accumulation that Belloc predicted 40 years before Hayek.

Hayek was correct that the growth of govmint was threat to freedom and a road to serfdom. However, the Keynesian road was just that: a slow, pot-filled and bumpy road. And since Keynesian policies tended to minimize the differences between wealth and poverty, it was more democratic and may even have slowed the modern march to economic serfdom. Hayek's policies, on the other hand, have converted this slow road to a super-highway. Regulation and planning have not diminished, but grown, and the headline in the Times, like so many of their headlines, is just so much old news.


Malt Does More...

Malt does more than Milton can
To justify God's ways to man
A. E. Housman

Housman's rather cynical appraisal of the relative merit's of poetry and beer may, or may not, be the appropriate verse to introduce readers to "The Catholic Beer Review." Now, it may not be immediately apparent why a beer review ought to be Catholic, since the pleasures of beer are available to pagan and Christian alike. Yet, as G. K. Chesterton noted, "Christianity is the only frame which has preserved the pleasure of Paganism." And since the Pagans were kind enough to discover the genuine pleasures of beer, it is up to good Christians to preserve that pleasure and pass it along. Hence a "Catholic" beer review may indeed be appropriate.

The point of Housman's poem is that beer is a false justification of God's ways. He continues:
Ale, man, ale's the stuff to drink
For fellows whom it hurts to think:
Look into the pewter pot
To see the world as the world's not.
And faith, 'tis pleasant till 'tis past:
The mischief is that 'twill not last.
Oh I have been to Ludlow fair
And left my necktie God knows where,
And carried half way home, or near,
Pints and quarts of Ludlow beer:
Then the world seemed none so bad,
And I myself a sterling lad;
And down in lovely muck I've lain,
Happy till I woke again.
Then I saw the morning sky:
Heigho, the tale was all a lie;
The world, it was the old world yet,
I was I, my things were wet,
And nothing now remained to do
But begin the game anew.

And yet, I can offer something about beer-brewing that proves, to my pagan mind, why malt does indeed offer convincing proof that God does indeed love us. In the process of brewing beer, there is a critical temperature. It is the temperature of the "sparge" water, the water used to wash the sugars out of the barley malt, and it must be 167 degrees. A few degrees lower, and you won't get all the sugars, a few degrees higher and you will get unpleasant tannins along with the sugars.

Yet, in the days before thermometers, which include most of the days during which mankind, Christian and pagan alike, have brewed beer, how did they possibly know when the water had reached that critical number? Boiling point is easy to find, but boiling water will ruin the wort. So how did they know? As it turns out, there is a sudden change in the reflectivity of water just at this critical temperature; that is to say, you can detect the change in temperature just by looking at the water, no thermometer required. Now, one can invoke mere coincidence to explain this. But to invoke coincidence is to reject not just God but science. For if we can attribute such miracles to coincidence, then we never need look for the cause of anything. And I think it quite reasonable, nay, quite scientific, to attribute such an amazing "coincidence" to the care and concern of God for his creation.

If you have wasted your life drinking the tasteless products of Budweiser and Coors, I suggest the Catholic Beer Review as an introduction to some new pleasures of the palate, and a new lesson in the love of God.


Nine Zeros (and Counting)

Astute readers will note that the National Debt Clock has passed the $9,000,000,000,000 level. That's Nine Trillion Dollars of debt.

And it is understated. Our real debts include all the money held by foreigners (we need $2 Billion from them each and every day just to balance our trade accounts), obligations to medicare and social security, and God knows what else the govmint is hiding.

Of course, there is no way to pay all of this money. The only real way to wealth is work; you must produce products that are good and useful and marketable. But we are losing our ability to make things; we are outsourcing our manufacturing to foreign lands, because we have confused financial profits with real profits.


The Anbar Argument

We are about to enter the silly season, that is, the season when silly things will be said about serious matters, matters of life and death. The Battle of Baghdad is nothing compared to the battle to spin the Battle of Baghdad, with the administration desperately looking for some sign of "success" that it can use to sell its pointless war in Iraq. And it seems as if the selling point in this marketing campaign is the success in Western Iraq, namely Anbar province. And indeed, there has been some improvement, but the source of this improvement is worth examining.

In the first place, "our" success is viewed as a failure--even a great danger--by the Iraqi government. What we have done is arm the local Sunni sheiks, the same sheiks who oppose the mainly Shiite government. This in itself is not a bad thing. However, it does create a counter-force to the central government, and lays the groundwork for a new front in the civil war. What we did in Fallujah is essentially the same thing the British did in Basra: resign control of the city to local militias and withdraw to an isolated fortress. We condemned the British for this tactic, but are doing the same thing ourselves.

In the second place, this "success" is greatly exaggerated. For example, we are told that American deaths are down for July and August. And this is true. However, of the five July's we have been in Iraq, this July was the bloodiest and August the second bloodiest. And September, through the first six days, has already seen 18 deaths, or three/day.

But Fallujah is "quiet" right? Yes, deathly quiet. Since May, all car and truck traffic has been forbidden in the city, which certainly cuts down on car bombs, but has also wrecked the economy of the city. And while attacks are down, they have not stopped by any means; rather they have been reduced from 400/month to 100/month.

Gen. Petraeus will tout Anbar as a symbol of our success. The problem is that the General has a history of making claims of "success" that are later refuted by events on the ground. In 2004, he claimed that "Iraqi security elements are being rebuilt" and "Iraqi leaders are stepping forward." In 2005, he proclaimed that "there has been enormous progress with Iraqi security forces." Now we have more claims. Should we put any more trust in them then in previous claims?

But the real problem with the "Anbar Argument" is that it argues not for a surge, but for a withdrawal. If the answer is to turn security over to the locals and withdraw to a fortress, the best fortress is fortress America. The truth is, only Iraqis can fix Iraq. The Kurds are running their own affairs without out help, and Southern Iraq is more or less self-governing because the "coalition" has little involvement. The best argument (and really the only intelligent one) for staying is the "pottery barn" argument: we broke, and its up to us to fix it. However, this begs the question of whether we can fix it, or whether or very presence makes the situation worse. But if the experience of Anbar, Kurdistan, and Basra is any indication, the best way "we" can fix it is to leave the Iraqis alone to take care of their own affairs. In fact, that might be a pretty good foreign policy principle in general.


The Investor's Dilemma

The whole point of Distributism is to restore distributive justice to the economy. It does this by ensuring that most men and women have access to property, the means of production. Without this, they cannot properly bargain for wages, and the wage contract becomes leonine, that is, based on inequality. The employer can hold out much longer or (in today's economy) outsource the work to subsistence laborers in other countries. The worker is therefore forced to accept whatever terms are offered, and distributive justice is violated. However, this causes a great imbalance in the economy, a disproportion between supply and demand.

It would seem that in a leonine labor market the capitalist will gain all that the worker loses. And certainly in the short term this must be true. The investor thinks himself happy to increase his profit by lowering his labor expense. And for any given investor, this is true. But if it is the general condition of the economy, a severe problem arises. For as Chesterton pointed out, you cannot lower the amount that your employee makes without also lowering the amount that your customer can spend; they are the same person. If one manufacturer out-sources his labor to a subsistence country, he will gain a great advantage over his competitors. But if everyone does it, not only will he lose his advantage, he will lose his customers. Economics is much like accounting: it is purely a question of balance. This problem is at the root of the investor’s dilemma.

When the worker gets less than his productivity demands, capital concentrates at the top. But while wealth is concentrating, the market is narrowing, for the market depends on a broad base of consumers; a narrow base simply cannot spend fast enough and purchasing power is lost to the economy. The result is an increasing concentration of capital and a less-stable market. Capital thus has a more difficult time finding decent returns, because more capital is chasing fewer investments in a narrow market, and returns fall. This leads to several consequences. The first is that consumption must be subsidized by consumer credit if the markets are not to fail entirely. However, consumer credit leads to further concentrations of wealth, thus exacerbating the problem. Further, such credit mortgages the future: you can increase consumption by a borrowed dollar today only by decreasing it by that same dollar, plus interest, tomorrow. Which leads to a further need for consumer borrowing, a greater concentration of wealth, etc. A vicious cycle is set up that must fall of its own weight.

The second effect of wealth concentration follows the first: risk premiums become flattened or disappear entirely. The search for returns in a narrowing market exploits every possible market niche in ever-more sophisticated and incomprehensible ways. More and more loans are made to weaker and weaker borrowers at lower and lower rates. Wider and wider segments of the economy are caught up in increasingly risky loans, and are caught up without being aware of it. But while risk premiums may disappear, risk itself does not. It may hide, but it will surface, given enough time. And when it does, investments that seemed sound turn sour. And when large numbers of loans turn sour at the same time, banks, hedge funds, pensions, mutual funds, and ordinary investors discover risks in their portfolios that they did not know they had; they did not know they had these risks because the risks were not properly priced. At the same time, failed loans cause a drop in the underlying asset values; asset values change, but debt remains. Risk is replaced with uncertainty. There is a crucial difference between the two: risk can be priced, uncertainty cannot. Risk is looking at a package of 1,000 loans and being able to say, with some degree of confidence, "5% of these loans are likely to fail." Uncertainty means looking at the same package and saying, "I have no idea how many are likely to fail."

The investor’s dilemma is simply that he got what he wanted and found he didn’t want it at all. He wanted more than that to which he was entitled in order to increase his financial security, and found that he destroyed the security of the whole economy. But getting more is no good if it merely means someone else gets less. The balance is destroyed and an unbalanced economy is headed for a fall. Only by a proper sharing, a sharing in accord with distributive justice, can economies maintain their balance.

Today, this scenario is being played out, as it has often been played out in the past. The government is likely to attempt a bail-out of the market. This will end up rewarding the people who made the bad loans and the bad investments and punish everybody else. It will restore, for a moment, the confidence of the markets, but at the cost of inflation, that is, at the cost of taking a little from everybody and giving it to a few. Further, it will likely end up multiplying uncertainty, not reducing it, as well as encouraging the very behaviors that got us here in the first place.


Why I am Not a Libertarian

Kevin Carson has made an excellent case for the connection between Libertarianism and distributism. (Of course, I do not mean here the caricature of libertarianism that has predominated since Ludwig von Mises; that kind of libertarianism is simply silly.) Nevertheless, I do have some critiques which keep me from being a whole-hearted libertarian.

The first criticism I would offer has to do with the efficacy of the pure price system. Libertarians tend to believe that all externalities are the result of govmint action. (Externalities are the costs of a transaction not borne by the parties to the transaction, but placed on some third party who is not involved. Pollution is an example of an externality.) Yet I question that assumption. One can easily undercut the market by, say, developing a cheaper manufacturing process which merely dumps the hazardous wastes into the nearest stream, causing hardship for those down river. There is no reason, that I can see, to assume that such externalities are impossible without govmint, and many reasons to believe that the absence of a public authority will encourage such externalizing. Indeed, without monitoring, how is anybody to know that it is happening? And if monitored, how is anybody to put a stop to it without some sort of government? Now, I am a believer in market pricing, but I am not a believer in the theory that the market price encodes all information about a product. As long as their are externalities, or even the possibility of such, will there not be required a political process (call what you will) to arbitrate the externals and assign costs? But such a function turns out to be complex and hence problematic in terms of Libertarian anarchism.

The second critique is the absence of distributive justice. Mutualism, as Kevin presents it (and I may be wrong here) relies (as does neoclassical economics) on corrective justice only, on free contract. But contracts arbitrate power, not productivity, not a contribution to the productive process. That is the whole reason that the formulas of marginal productivity do not work: they marginalize not productivity but power. Any glance at the difference in pay scales between the CEO and the line worker, between the sweatshop seamstress and the owner confirm that power is the key, not productivity. earns 500 times more than the line worker not because he is 500 times more productive but because he is 500 times more powerful; the seamstress in a sweatshop will be given a pittance not because she lacks productivity but because she lacks power. A glance at the statistics on the increase in productivity compared to the flatness of the typical wage shows the same thing. A contractual system, apart from a prior notion of distributive justice, will end in power being arbitrated, for that is what contracts do. Now, you can reasonably reply that a notion of distributive justice is satisfied by usufruct of land, and that will be true to a large extent, but not completely, because land is not the only factor of production. There will be many opportunities to cheat, which brings me to the next critique: you have not accounted for sin.

I am not so dogmatic as to insist on a notion of sin in a theological sense, but I think we can all agree that people have a tendency to try and profit at the expense of others, a desire to earn a surplus profit. Oddly enough, this is not really a desire for gain in terms of money, but in terms of power. For it is easy to show that everyone would be better off in an economic sense in a mutualist system. However, economic betterment is not the issue; power is. The pure joy of being able to lord it over your neighbor holds an irresistible attraction for at least some people, and maybe more than we think.

All of these things are problematic, are they not, for anarchism. Men have always had govmints not because of flawed thinking, but because of practical problems. The community has a role in all these affairs for all of these reasons, but a freely contracting society would have difficulty in handling them, would it not, because they cannot be subsumed under contract. Therefore, corrective justice alone is insufficient, and economics must also be political economy.

Which brings me to by last critique, and that is that contract, social or otherwise, does not exhaust the nature of man; it is too individualistic, while man is social. We are called into being by the ready-made community of family, and we receive a series of gifts which are purely social in nature and not exchangeable: language, nationality, custom, moral sense, etc., are all gifts outside the exchange system and cannot be accounted for by that system. Yet the exchange system relies on them and cannot exist without them. Therefore, a better description is needed.

Having said all that, I do not wish to over-emphasize the critique; I do not wish to make distributivism and mutualism mutually incompatible, for they are largely variations on a theme, a theme of freedom. But I think it useful to point out that the vulgar libertarians, when they defend pure corporations and even monopolies (as they do), are not as inconsistent as some might think them. If free contract is all, then a group may freely contract to oppress or gain some non-market advantage. If absence of govmint interference is the only standard (and anarchism lends itself to that interpretation) then there can be no govmint or even community to put a stop to it. We begin (and end) in non-contractual communities, and this fact about humans, this social fact, has to be accounted for in the social systems, and economics is certainly a social system.


Free Market Anti-Capitalism

The following article is by Kevin Carson, the author of Studies in Mutualist Political Economy, an excellent study of what might be called "left-wing libertarianism." Kevin's blog is "Free-Market Anti-Capitalism." With this article, we are initiating a series to introduce readers to economic approaches which are similar to Distributism, even where there remain serious differences. In a day or two, I will post my own critique of libertarianism. [Note: If anyone has any suggestions for other views to include in this series, please e-mail me.]

There has been frequent contention between free market libertarians and distributists.For example, Mises.Org has run several anti-distributist pieces (most notably by Thomas Woods) On the distributist side, John Médaille--who kindly invited me to write this guest post--has in my opinion made the mistake of treating the right-wing stance of Mises.Org as inherent in free market libertarianism as such.

In fact, I believe there is a great deal of potential agreement, as well as room for fruitful collaboration, between distributistism and the left wing of free market libertarianism.

Far too much of the libertarian mainstream leans toward pro-corporate apologetics, and confuses free market principles as such with the interests of big business and the wealthy.I commonly refer to this as "vulgar libertarianism."But this tendency does not follow of necessity from free market principles. In fact, as many of us on the free market left argue, it actually represents a perversion of free market principles.

Most of the mutual animosity between distributists and free marketers comes, not from the inherent principles of either ideology, but from cultural prejudices that have little to do with those principles.On the part of (some) Misoids, this comes from an instinctive affinity for big business and the wealthy, and a desire to defend the concentration of wealth and the rise of wage employment associated with the existing form of industrial capitalism as the products of a free market. On the distributist side, it comes from the unjustifiable acceptance of such vulgar libertarianism as representative of libertarianism as such.

In fact, far from starting out as conservative, the free market liberalism of the early political economists--Smith, Ricardo, and Mill--was a revolutionary doctrine aimed at the abolition of economic privileges, like those of the mercantilists and the Whig landed oligarchy. It is perverse that so much of the libertarian mainstream has since become identified with the modern-day counterparts of the mercantilists and landlords: the giant corporation.

But significant currents of free market libertarianism adhered to the original radical approach. Several radical strands of classical liberalism, including some self-identified socialists, drew radical conclusions from Ricardo's observation that the income of landlords and capitalists came from value produced by labor. The radical direction in which they took their free market philosophy was just this: if the natural tendency of a free market is for labor to receive its full product, then the fact that labor does not receive its full product under existing capitalism can only result from privilege. Capitalism, as distinguished from a free market, is a system in which the state represents the owners of capital and land and intervenes in the market on their behalf. Its enforcement of special privileges keeps land and capital artificially scarce and expensive in comparison to labor, so that labor must pay tribute for access to the means of production. Let, therefore, the state remove its guarantees of privilege, and let the suppliers of land and capital compete in a free market without entry barriers, and land and capital will cease to draw monopoly returns; the wage of labor will rise to its full product.

Some version of this reasoning was adopted as the basis for Proudhon's mutualism, the radical free market thought of Thomas Hodgskin in England, the individualist anarchists in America running from Josiah Warren through Benjamin Tucker (my own chief influence), and the Georgists.

Although he did not adopt nearly such thoroughgoing radicalism, Murray Rothbard (perhaps the most prominent star in the anarcho-capitalist sky) did view the present system as one in which our corporate state uses the coercive taxing power either to accumulate corporate capital or to lower corporate costs. At the height of his strategic alliance with the New Left, Rothbard enthusiastically mined the radical history of Gabriel Kolko and William Appleman Williams for insights that could be incorporated into a free market critique of state capitalism.Today, the Alliance of the Libertarian Left continues to develop this left-wing aspect of Rothbard's thought.

The chief substantive difference between distributists and left-wing free marketers, it seems to me, involves not so much our sympathies or goals as our understanding of causality. To take much distributist rhetoric at face value, it seems to imply that the present concentration of wealth and capital emerged from laissez-faire and is the natural result of a free market, and that some form of state intervention is necessary to prevent wealth from being concentrated in fewer and fewer hands. The left-wing free marketer, on the other hand, sees the natural tendency of the market as egalitarian and decentralist, and sees the present day system of corporate power and concentrated wealth as the result of massive state intervention on behalf of the wealthy and powerful.The left-wing free marketer says the same thing his radical free market ancestors said:remove all state subsidies to big business, and all special privileges protecting it from competition, and the market will operate as dynamite at the foundations of corporate power; let the dynamite of the market operate, and we will see a decentralized economy of small-scale industry producing for local markets, with widespread cooperative ownership and self-employment.


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